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Government GDP Debt Ratio - What if?


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4 minutes ago, CdnFox said:

The US has one luxury in that it's an anchor currency and they can get away with certain things that would be brutal for most economies as  a result....

 

You call it an "anchor currency". I call it a reserve currency.

I am thankful that we Canadians - like Norwegians and the British - still have our own monetary policy. 

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18 minutes ago, August1991 said:

You call it an "anchor currency". I call it a reserve currency.

I am thankful that we Canadians - like Norwegians and the British - still have our own monetary policy. 

It is that as well, but there are a number of reserve currencies. The term just means currencies that are so popular that a lot of countries have a significant amount in their banks as part of their 'reserves'.   Being the 'anchor' usually means the 'prime' currency if you will, the one that everyone else turns to for stability. It means you can skrew up a lot more than other currencies and still expect to be strong  :) 

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On 1/15/2024 at 9:30 PM, CdnFox said:

It is that as well, but there are a number of reserve currencies. The term just means currencies that are so popular that a lot of countries have a significant amount in their banks as part of their 'reserves'.

...

Agreed.

In Canada, our banks keep reserves in Canadian dollars to settle. 

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20 minutes ago, August1991 said:

Agreed.

In Canada, our banks keep reserves in Canadian dollars to settle. 

No, they keep reserves in foreign currencies.  That's why they're 'reserves'.  Doing so allows them to do a number of things.  For example if the canadian dollar were to start to slip they can use their reserves to buy CDN dollars and prop the price back up. Or if a foreign currency is starting to overheat they can sell to ease the prices (theoretically)  And it's a hedge against inflation or deflation of the Canadian currency in a strategic sense.

The only canadian money we keep in reserve is the ink for the printers :)  LOL

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13 minutes ago, CdnFox said:

No, they keep reserves in foreign currencies.

....

Canadian banks of course keep foreign currency for foreign settlement - but they hold Canadian dollars for local settlements.

My question is how do their holdings of foreign reserves - US dollars- affect their domestic holdings. 

Edited by August1991
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1 hour ago, August1991 said:

Canadian banks of course keep foreign currency for foreign settlement - but they hold Canadian dollars for local settlements.

My question is how do their holdings of foreign reserves - US dollars- affect their domestic holdings. 

I answered that already. And by the way sometimes they demand foreign settlement be in canadian dollars for various reasons. They don't "keep" large reserves of canadian money.

But as for foreign it allows them to exert some control over our domestic currency. If the dollar needs shoring up then canada (and usually a few other nations) will dip into their reserves of foreign money and buy canadian dollars up, which jacks up the price just like buying a stock jacks the price.  We do it for other countries too if there's a need.

 

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